6/12/2012 - The Current Market Sentiment

[walid]

While the markets are still taking a cautious stance moving in a side tight way waiting and hoping for a reached agreement can reduce the hardness of the fiscal cliff by the beginning of the next year Inshallah, The gold is still retreating back under the pressure of easing market concerns over the EU debt issue following the recent Greek agreement.
The gold is trading currently well below 1700$ per ounce, Despite the consecutive rising of the inflation annual rate in US in the recent months from 1.4% in July to 2.2% in October, while the inflation outlook looks undermined by rising of the expectation of easing of the growth pace globally in US because of the fiscal cliff which seems to be unavoidable with the time running with no clear clues of a reached deal between the Republican Party and the Democratic Party for avoiding its massive negative impact.
From another side, The Chinese economy could give signs recently to the market by consecutive increases of its exports in the recent months from $25.1B in July to $32B in last October triggering optimistic speculations for better than previously estimated ability of growing by the Chinese struggling economy which refreshes the demand for commodities but this was not enough too to push up the gold and as long as there is no signs of reaching an agreement for reducing this negative impact yet
So, the gold can only be rescued and saved nowadays from further falling by new hints from the Fed of keeping or loading more in its balance sheet for stimulating the economy in a monetary way or even by rolling out what can replace the OT after its ending this month. So, the market will brace for its meeting next week by God’s will.
As the governmental financial way seems to be off in the next years on the fiscal cliff which can cost the American families from $2k to $5k a year cutting the GDP growth by 1% approximately by God’s will with no concession until now because Obama seems insisting on the tax hikes and the republicans are still pushing for cutting further health care spending showing that there can be no change of last year last summer agreement to start the austerities measures from the beginning of next year by cutting the govern mental spending by $109 bln and ending Bush’s tax cuts after it has been extended before for another 2 years and imposing new taxes to the higher than 250k$ income a year families ending emergency unemployment benefits to cut the deficit by about $550 bln next year in a plan for saving 7 trillion dollars in 10 years.
So, the volatility can keep growing as long as we are to go to the charismas holidays with no deal yet as the difference between having a deal or not is big to the markets which have actually started to price in an ambitious way for reaching some sort of compromise or deal can lower the severeness of the cliff since the presidential election ended.
God willing, in the case of falling further, the gold can meet again important supporting level at 1672$ whereas it could rebound last month while breaking it this time can lead to other levels at 1646$, 1584$, 1548$ before 1523$ which could hold its falling from 1920$ but in the case of rising again, XAUUSD can be met by resisting levels at 1754, 1802 before 1827 which can open the way for its highest recorded level at 1920 on the 6th of September 2010

Kind Regards
FX Market Strategist
Walid Salah El Din
Mob: +20 12 2465 9143
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